Intro to System Analysis

· 1303 words · 7 minute read

1. Intro 🔗

Will countries be better off when their GDP doubles? Will employees enjoy a better life when the minimum wage doubles? Will companies enjoy more profit if employees double their working hours? Will companies be more competitive when their developers write 2x more lines of code? Will you lose weight if your calorie intake halves?

If you think the answers are obvious, the systematic analysis can help broaden perspectives and make better decisions. To survive in this complex world without losing sanity, our brain heavily relies on mental shortcuts (a.k.a. heuristics) to make decisions. Saving the brain’s energy consumption was crucial when we lived relatively simpler lives for millions of years. However, they often backfire in the modern world when a deeper analysis can save us. Let me highlight three common pitfalls.

  • Isolation Fallacy: Events rarely happen in isolation in our connected world. When a company demands longer working hours, employees lose productivity. When a company values more lines of code, developers write lengthier code with high maintenance costs. Similarly, when GDP increases, the cost of living (especially housing costs) tends to increase with more polarization. Higher revenue growth of a company often comes with higher costs or more diluted shares, not necessarily benefiting the existing shareholders.
  • Linear Illusion: Sometimes, less is more. Lack of food (fasting) can be more beneficial than abundant, nutritious food for your health system. Low-cost index funds can be superior to sophisticated financial products. When US hospitals charge thousands of dollars for simple procedures that cost less than ten in other countries, it boosts the GDP at the cost of life quality. Similarly, high-calorie, full-fat yogurt is much healthier than low-calorie, ultra-processed junk.
  • Feedback Oversight: Our actions, shaped by current circumstances, reshape those very circumstances. Once a surefire path to success, university degrees have become less valuable as more people obtain them. Social media platforms, initially connecting people, now often lead to isolation and mental health issues. Similarly, antibiotics, life-saving when first introduced, have led to dangerous resistant bacteria through overuse. In each case, the very success of a solution triggers feedback loops that ultimately undermine its effectiveness.

Those pitfalls often yield surprising consequences, possibly with irreversible damages, even when we have good intentions. The damages worsen as our first reaction is to do more of the same, exacerbating the situation. For example, we obsess more about calorie numbers when weirdly produced food hurts the core body system. We demand more government interventions when it gets more dominant and traps more people into serfdom. To reverse the trend, it helps to observe how different components are connected in the larger system, and it is the start of the system analysis.

The less code, the better! 1 point for adding a line of code, but 2 points for deleting a line. Bloatware is the devil. – Elon Musk

2. System Examples 🔗

Humans have tens of trillion cells (so more than 13 0s). The number of bacteria cells that live inside the body and play essential roles in health (a.k.a. microbiome) is at a similar magnitude. We as humans don’t care, or even notice, about individual cells dying, and it is estimated that we lose 50 to 70 billion cells every day (and generate as much of the new ones). For example, red blood cells have a lifespan of a mere 120 days. Overall, like the Ship of Theseus, we are still who we are (at least, we think so), even when every part of “us” is replaced.

Human System

Similarly, I want my Cloud (e.g., Gmail, Google Drive) to function seamlessly even when individual machines go wrong. Even if each machine has a 5-year lifespan with no fault in between (which sounds unrealistically optimistic), I’ll see one machine failing every hour in a cluster with 50k machines. The number will worsen as we include different failures like network, power, etc. Still, even if my server is faulty, I don’t want my Cloud to stop working until a mechanic fixes the particular machine. So, the system should handle frequent minor failures and hide them from outside view. Obviously, it has a lot to learn from the human system that handles staggeringly diverse types of failures (even DNA replications can fail) and provides resiliency (most of the time).

In sum, the whole is larger than the sum of its parts. You cannot know the whole by inspecting each part deeply. Often, the system performs better when individual parts perish, showing their interests aren’t necessarily aligned. For example, we want our immune system to terminate cancerous cells. Similarly, it can be much cheaper to terminate faulty machines than to fix an issue, even when the fault isn’t from that machine. Conversely, some actions can only benefit parts while hurting the system. For example, promoting managers by the number of reports can benefit employees who are good at expanding the team, but the overall company system will suffer from inefficiency. Overall, good behaviors for parts can be toxic for the system, and bad ones can benefit the whole.

3. System Analysis Examples 🔗

We are bombarded by a continuous stream of temptations to try A, try B, and so on. It is always compelling as they all sound like a great solution to dramatically improve my life. My purchase is someone else’s revenue, and that’s the basis of modern society. But what if it is best not to consume? For example, a growing number of studies show the benefits of fasting. Thinking more, it is likely we, as Homo Sapiens, evolved to thrive when food wasn’t abundant and fasting was common practice. However, no one’s incentivized to promote less consumption! More food causes more illness, and more illness welcomes more medical intervention. As a result, the food industry is happy, and the pharmaceutical industry is happy. They can spend more money on ads, so the media industry is happy, too. But are we happy with the outcome?

The above example hints at the power of systematic analysis. Even when there’s no adverse player, we are often doomed to poor outcomes, and we need system analysis and proper intervention to get better results. Sometimes, it means rejecting society’s default options, like overeating or overdosing on medicine. Of course, it isn’t suggesting we should return to the prehistoric era, where individuals were powerless in front of continuous violence and diseases. Instead, we should think hard to leverage what the society offers. For example, I believe steaks, eggs, intestines, or bone broths humans consumed for thousands of years are much better options for most people (with a good combination of fasting) than sugary drinks with donuts and fat-free snacks, even when incentives to promote the ancient food are much weaker.

I directly witnessed cases where ancient lifestyles performed much better than prescriptions that doctors recommended, but health isn’t the only area to benefit from system analysis. For example, we naturally prefer expensive stocks and sell them when their prices decline (due to conformity bias), and it is no wonder why successful investors like Warren Buffett emphasize independent thinking. Likewise, we make lots of decisions in the world of systems, and if we can improve our decision-making skills, it will have compounding impacts on the quality of our lives. So, I care about the system, and probably so do many others.

You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right – that’s the only thing that makes you right. – Warren Buffett

4. Application 🔗

It is important not to aim for perfection. The end goal is to apply better principles in practice, and real life is inherently noisy with randomness and uncertainty. Sometimes, the outcome can be worse than the default, even when the expected value is much higher, but that’s also part of life.